Published on February 25th, 2019 | by Joshua S Hill0
A Consistent 4th Quarter Belies Concerns For First Solar
February 25th, 2019 by Joshua S Hill
US-based solar manufacturer First Solar announced its Fourth Quarter and Full Year 2018 financial results last week, revealing steady quarterly revenue which nevertheless missed the market consensus, and annual revenue which was down 24% on the previous year, revealing underlying concerns even as the company ramps up its Series 6 manufacturing.
Taken in a vacuum, First Solar’s first quarter was strong, with revenue of $691 million for the quarter, an increase of 2%/$15 million on the previous quarter and making up tremendous lost ground on the same quarter a year earlier, which had collapsed to $339 million amidst concerns regarding the pending imposition of the Section 201 tariff on imported solar cells and modules. Earnings per share for the fourth quarter was $0.49 compared to $0.54 in the third quarter, and cash and marketable securities at the end of the fourth quarter decreased to $2.5 billion from $2.7 billion at the end of the third quarter.
“We had a number of notable accomplishments in 2018, including strong net bookings of 5.6GWDC and the start of Series 6 production at three factories,” said Mark Widmar, CEO of First Solar. “Our Series 6 progress in 2019 continues to be encouraging with the start of production at a fourth factory and ongoing improvements in throughput and efficiency at our existing facilities. We continue to see good demand for Series 6, and our pipeline of contracted shipments positions us well for the year.”
However, nothing happens in a vacuum. First Solar reported yearly revenue of $2.2 billion, down 24% from the $2.9 billion taken in during 2017, and earnings per share of $1.36 which actually increased substantially a year ago.
First Solar missed market expectations on fourth-quarter revenue and earnings per share, although investors appear to be relatively content given the upward trend of the company’s shares in the wake of its earnings announcement.
Nevertheless, the company’s continued transition to Series 6 module production across its production capacity continues to yield roadblocks to growth.
“First Solar faced operational issues in 4Q as poor weather slowed deliveries and EPC work, which escalated costs and delayed some revenue recognition,” explained James Evans, a Global Clean Energy Analyst with Bloomberg Intelligence, who provided his comment to CleanTechnica via email. “Activity in 2019 will likely be heavily weighted toward 2H, with higher Series 6 costs at the start of the year on lower utilization rates. This raises potential operational risks for 4Q as in 2018. First Solar’s unchanged revenue guidance for this year, even as some sales were delayed from 2018, reflects a more conservative approach, likely due to the year-end shipment profile.
“First Solar will commission its second Vietnam plant more quickly, which will depress gross margin on higher ramp-up costs, yet cut operating expenses. A faster commissioning enables improved supply flexibility, with the company still broadly capacity constrained.”
Looking forward, First Solar has provided 2019 guidance of revenue in the range of $2.35 billion to $3.45 billion, with a gross margin of between 20% and 21% and earnings per share in the range of $2.25 to $2.75. First Solar expects to ship between 5.4 and 5.6 GW worth of solar modules in 2019. The company currently boasts an order pipeline of 12.1 GW (as of February 21) which will nevertheless hold First Solar in good stead as it progresses through its company-wide transition to Series 6 production and manages these structural costs.